The FMCG industry continued its growth momentum in the January-March period, clocking a value growth of 9.4 per cent (including the e-commerce channel) driven by double-digit rural expansion and positive growth in metros, according to NielsenIQ.

But the research and insights firm flagged off a dynamic situation being faced by the industry as the country battles a ferocious second wave of Covid-19.

Diptanshu Ray, NielsenIQ South Asia Lead, said that the recovery in Indian FMCG industry growth (7.3 per cent) that was seen in December quarter strengthened further in the March quarter, backed by consumption growth in both food, non-food and indulgence categories.

“However, the beginning of the second quarter may bring some new dimensions, as the situation is dynamic across the country. While the situation in the second wave is different as there isn’t a national lockdown and supply chains disruptions have not been as rampant as during the first pandemic wave. The severity of the pandemic began in mid-April and it all depends on how prolonged the second wave will be,” Ray told BusinessLine.

Price rise

The sector’s overall growth in the March quarter was not only supported by an uptick in volumes but also due to price increase taken by companies, especially in the foods segment.This also indicates inflationary pressures being faced by packaged food companies.

Sameer Shukla, Customer Success Leader, NielsenIQ South Asia, said that in the food category , a significant increase in input costs for some of the commodities such as palm oil and tea enabled the category, especially in staples, to see a boost due to a pricing uptick in the March quarter. The foods category’s value growth stood at 13 per cent, with nearly 8 per cent of this growth being price-led.

However, the non-food categories basket ( value growth of 3 per cent) saw a dip in the average pricing due to a rise in consumer promotions and increased contribution of larger packs in the consumer basket.

Rural growth

Rural growth momentum sustained during the March quarter, witnessing a value growth of about 14.6 per cent. Large and medium companies also saw sales bounce back in rural India during this period, the NielsenIQ report stated.

Asked about the impact of the broader spread of the pandemic to rural region in the second wave, Ray said, “There are, of course, concerns around the spread of the pandemic in rural regions and its impact will need to be monitored. But factors such as good monsoon forecast, increased outlay for MGNREGA and other government schemes and a broader shift towards packaged from loose categories, are expected to support growth in rural markets.”

Meanwhile, metro cities also moved to a positive zone with 2.2 per cent value growth in the March quarter after witnessing degrowth in December quarter.

Traditional trade

While general trade and Kirana channel continued to witness strong growth in March quarter, the organised modern trade stores witnessed sequential recovery. At the same time, e-commerce sales growth for the sector which had peaked in September quarter last year, stabilised in March quarter. But the insights and research firm said that with localised lockdowns back in April, the e-commerce channel will continue to be dynamic.

Shukla said it will be critical for companies and retailers to gauge the interplay of retail channels especially in metros during the second wave lockdowns.

Related Topics
comment COMMENT NOW